The Structure of Healthcare Benefit Plans

The reimbursement process for these medical expenses can be managed and administrated by a number of entities, including a governmental agency, a private business, or a nonprofit organization. Healthcare financial protection—the reimbursement of incurred expenses—can be channeled through insurance companies or health maintenance organizations (HMOs), by preferred provider organizations (PPOs), by Blue Cross, and by Blue Shield. These programs have evolved from associations into insurance offerings licensed by the respective associations, as discussed in more detail later in this chapter.
The company sponsoring a healthcare program can, itself, pay the expenses on behalf of the employees and their dependents via a self-insured plan. Covered expenses can be limited to specific types of medical expenses or broad enough to cover all types of expenses.
Evidence suggests that, among all the functional benefits provided by an employer as part of the employment contract, workers regard healthcare benefits as the most important by a wide margin. As medical care costs increase, the importance of healthcare benefits to employees also increases, because of the fact that medical costs, particularly major medical procedures, can be financially ruinous if company-sponsored healthcare benefits do not exist. People are often forced to declare bankruptcy under the burden of attempting to pay for an unexpected and catastrophic medical incident.
It is imperative to note that healthcare benefit plans that are sponsored by employers are undergoing fundamental structural changes. In 2012, the management consulting firm Oliver Wyman3 conducted a healthcare benefit study that indicated that companies are faced with a major conundrum, now more than ever: With the passage of the healthcare reform legislation (the Patient Care and Affordable Care Act of 2010), companies are suggesting, rather strongly, that they will continue to protect their employees by providing them with a company-sponsored healthcare program. However, at the same time, these companies are also indicating that the cost of providing this healthcare is unsustainable in the long run. So, employers are now at a crossroads. The next few years will be crucial as the real impact of the Affordable Care Act manifests.
3 Kairey, M., Rudoy, J., and Oliver, W. “Employer Sponsored Healthcare: What Happens Now?” Oliver Wyman, Marsh & McLennan Companies. 2012. Found online at www.oliverwyman.com/media/OW_EN_HLS_PUBL_2012_Employer_Sponsored_Healthcare_What_Happens_Now.pdf.